Amazon firmly in support of online sales tax legislation

Any lingering doubts that the nation's largest online retailer, Amazon, is now in full-throated support of federal online sales tax legislation were dispelled with testimony this week from a top company official before the House Judiciary Committee.

Paul Misener, vice president, Amazon global public policy, speaking in Washington D.C. Wednesday in a hearing broadcast on C-Span, got right to the point when, in the second paragraph of his testimony, he said: "Mr. Chairman, Congress — and only Congress — may, should and feasibly can authorize the states to require out-of-state sellers to collect the sales tax already owed."

For those who needed to hear the message again, in his fifth paragraph, Misener said: "Congress should authorize the states to require collection, with the great objects of protecting states' rights, addressing the states' needs, and leveling the playing field for all sellers."

Not to put too fine a point on it, but here was the nation's largest internet retailer — and long-time foe of internet sales tax collection — stating without qualification that there is not a constitutional right to shop on the internet tax free, despite the protestations of anti-tax advocate Grover Norquist that an internet sales tax constitutes a new tax, rather than one already on the books.

In Massachusetts, as in the other 44 states with sales tax, consumers who purchase an item from out of state for use in Massachusetts are supposed to pay a use tax (equivalent to the sales tax) and can do so on their state income tax return, on line 33. Few make this observance. In tax year 2010, of some 3.4 million tax filers, 54,387 (about 1.6 percent of all filers) paid $4.799 million in use tax, an average of $88.25 per taxpayer.

Misener noted that states have a considerable financial interest in taxing internet sales. "The states' financial needs should be addressed. The states face serious budget shortfalls, yet the federal government faces its own fiscal challenges. Congress should help the states' budget shortfalls without spending federal funds, by authorizing the states to require collection of the billions of revenue dollars already owed," he said.

Interestingly, in a political era that appears devoid of bipartisan support for much of anything, the Wednesday hearing evinced some of that support. In fact, Republicans from states such as Wyoming, Tennessee, Missouri, Arkansas, North Carolina, Florida and Texas have already stated their support for H.R. 3179 and S. 1832 despite having signed Norquist's no new tax pledge.

One of the 11, U.S. Rep. Steve Womack, R-Ark., asked if these bills could be construed as a violation of Norquist's pledge, replied, according to State Tax Today (subscription required), that nowhere in the tax pledge does it say that collecting legally owed use taxes amounts to a tax increase.

Not all internet retailers share Amazon's position; Overstock.com testified against, as did eBay. In his testimony, Overstock Chairman and CEO Dr. Patrick M. Byrne said, "The question the Committee must consider is whether innovative remote sale companies will emerge, employ Americans, and help our economy grow if Congress alters the status quo by allowing states to burden interstate commerce … Pass of such legislation would curtail the emergence of the next innovative E-commerce company and poison the internet's fertile ground for growth and innovation."

As previously noted in this DOR blog post, Amazon's position has evolved to the point where it now sees itself as a hired gun in the collection of internet sales tax for other internet retailers.

(Editor's note. Commonwealth Magazine has just published its own survey of the internet sales tax issue.)